UAE card spending up 8.5% in Jan-Oct 2018

Card spending in the UAE was 8.5% higher in nominal terms in the year to October compared with the same period last year, according to data compiled by Network International. Network International covers more than 50% of the UAE market for e-commerce and point of sale (POS) transactions.

Residents’ spending has increased as a share of total card spending

Spending on UAE cards was up 8.5% y/y in the first ten months of the year, and accounted for nearly 80% of all transactions. The share of domestic card spending has increased notably over the last four years: in Jan-Oct 2014, spending of UAE cards accounted for 73% of the total, while spending on foreign cards has shrunk from 27% of total card spending four years ago to 20% today.

Growth in domestic card spending year-to-October was strongest in Duty Free (+16.7% y/y), followed by Restaurants (14.8% y/y), although the rate of growth in restaurant spending has slowed sharply this year. The growth in restaurant spending over the last couple of years may partly reflect the shift towards app based food delivery services, from cash on delivery.

Residents’ spending on Airlines & Travel and Clothing & Boutiques have recovered over the last year, growing 10% y/y in the year-to-October. However, spending on luxury goods such as Jewellery & Watches remains soft, and was broadly unchanged compared with Jan-Oct 2017. While domestic spending on hotels is up 8% y/y through October, the rate of growth has slowed since the summer.

Domestic card spending by category

Source: Network International, Emirates NBD Research

Foreign spending on cards has grown over the last two years

Foreign card spending was up 8.2% y/y in the first ten months of this year, and has posted positive growth since the start of 2017, after contracting for much of 2015-16. While spending on US cards continues to account for most of the foreign transactions, there has been solid growth in spending from EU countries, Russia, China, the UK and India.

Unsurprisingly in the context of EM currency depreciation since the summer, spending on Indian, Russian and Chinese cards declined y/y in October, although the year-to-date growth remains strong. Spending on GCC cards has declined y/y since July 2017, except for July and August 2018 where there was a modest rise y/y.

Top 10 foreign spenders in the UAE (Jan-Oct 2018)

Source: Network International, Emirates NBD Research

Spending on GCC cards (% y/y)

Source: Network International, Emirates NBD Research

Which nationality spends the most in the UAE?

To estimate this, we have assumed that all of the Network International data refers to spending in Dubai (this is not in fact the case), and that all foreign spending in on cards. The latest available visitor numbers from the Department of Tourism and Commerce Marketing (DTCM) are for the year through August, so we have used August card spending data to estimate who the most ‘valuable’ tourists are.

Foreign spending per capita (excluding US cards); Jan-Aug 2018

Source: Network International, DTCM, Emirates NBD Research

The British are by far the biggest foreign spenders per capita, spending an average AED 2048 in the year to August 2018. This is 30% more than they spent per capita over Jan-Aug 2017. Kuwait and Saudi Arabia are tied in second/third place, although the growth in spending has been more modest. Australia, Russia and France are not far behind. The growth in spending from European visitors has been significant in 2018, with spending on Dutch cards up 35% y/y and French card spending up 19% y/y. Although spending on Russian cards was up 31% in the year to August, the number of Russian visitors was nearly 65% higher over the same period, so the average spend per Russian was down by around -20% y/y. Surprisingly, Omanis spent less per capita than Egyptians in the year-to-August.

Although spending by Indian and Pakistani nationals per capita was up 16% y/y and 18% respectively in January to August, they remain lowest in the group in absolute terms. This may also reflect a preference for cash amongst visitors from the subcontinent, or the use of non-Indian/ non-Pakistani bank issued cards whilst in the UAE.

Foreign spending by sector

Hotels accounted for more than 44% of total foreign card spending in the year-to-October, up nearly 7% y/y over the period. While hotel spending on Qatari cards was down more than 90% as a result of sanctions imposed last June, Russian spending on hotels was up 35.5% and Eurozone spending up 22% in the first 10 months of the year. Hotel spending on Indian and Chinese issued cards were up 19% and 16% respectively over the same period, and rank 8th and 11th in terms of foreign spending on hotels. The biggest foreign spenders on hotels remain the British, followed by the Saudis.

Foreign spending grew fastest on Duty Free (16.6% y/y in Jan-Oct) followed by Restaurants (15.3% y/y). Airline and Travel Agent spend on foreign cards increased 11.9% y/y. Non-residents also increased spending on Jewellery & Watches (6.6% y/y) over the January to October 2018, with spending on UK cards up nearly 65% in this category. However, foreign spending on Jewellery & Watches in September and October 2018 was lower than a year ago.

Foreign card spending by category

Source: Network International, Emirates NBD Research

Growth in foreign card spending (3m moving avg)

Source: Network International, Emirates NBD Research

Exercise caution when drawing conclusions

The card spending data needs to be considered in the following context:

The data is nominal (does not adjust for inflation) and has not been seasonally adjusted.

The data may reflect changes in market share of Network International, rather than an absolute increase/ decrease in total consumer spending.

The data only tracks spending on credit cards; we recognize that many visitors and residents still prefer to use cash.

While y/y calculations are helpful in looking at data that is highly seasonal, the lunar calendar means that y/y calculations are still affected by Islamic holidays such as Ramadan and Eid, which don’t fall in the same Gregorian calendar month every year.

The per capita estimates make a couple of significant assumptions: that Network International data is for Dubai only, and that all foreign spending is on cards.

Nevertheless, the data does provide some useful insights on the travel & tourism sector as well as domestic spending patterns.

Spending on UAE issued cards has increased this year, but at a slower rate than in 2017. The biggest share of domestic spending remains on travel & tourism, with hotels, airlines & travel agents accounting for nearly half of total card spending on UAE issued cards. Restaurant spend accounted for a further 22%.

Foreign spending is also concentrated in the travel & tourism sector, particularly when Duty Free is included. In fact, Duty Free shopping accounted for a greater share of foreign spending than Jewellery & Watches and Clothing & Boutiques combined. This highlights the importance of this sector for Dubai’s economy, and in particular, Dubai Airport’s role as an international travel hub.

European (including the UK) visitors generally spend far more on cards than visitors from Asia on a per capita basis. It would make sense for businesses in the tourism industry to target growth in European and Australian markets.